Tuesday, December 04, 2012

Were the United States to "go over the fiscal cliff," what do you expect would happen to the National Deficit?

At least according to the CBO and most economists, the correct answer is that "It will decrease." Going over the Fiscal Cliff would, according a Congressional Budget Office study, result in a reduction in the National Deficit of $607 billion between fiscal years 2012 and 2013.

However that was not the most popular answer. Per the survey, 47.4% of respondents said that the deficit would INCREASE if we went over the Fiscal Cliff. Only 12.6% think it will decrease.

The so-called "fiscal cliff" would cut spending and raise taxes, and the deficit would decrease very quickly. The key concern is that the CBO's analysis suggests a rapid decrease in the deficit will lead to a recession in 2013. That is why a better name is "austerity slope" or something similar.

• At 8:15 AM, the ADP Employment Report for November will be released. This report is for private payrolls only (no government). The consensus is for 125,000 payroll jobs added in November. This is the second report using a new methodology, and the report last month (158,000) was fairly close to the BLS report for private employment (the BLS reported 184,000 private sector jobs added in November).

• At 10:00 AM, the ISM non-Manufacturing Index (Service) for November will be released. The consensus is for a decrease to 53.6 from 54.2 in October. Note: Above 50 indicates expansion, below 50 contraction.

• At 10:00 AM, the Manufacturers' Shipments, Inventories and Orders (Factory Orders) for October. The consensus is for a 0.1% decrease in orders.

Another question for the December economic prediction contest (Note: You can now use Facebook, Twitter, or OpenID to log in).